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Summer calm before the storm

Even though Prime Minister Alexis Tsipras hailed last week’s Eurogroup deal as step in the right direction, Greece still has many rivers to cross as the agreement secured in Luxembourg fell far short of the goals set by the government.

First and foremost, Tsipras will have to deal with dissent emanating from SYRIZA MPs that had agreed to vote through a batch of tough legislation last month with the understanding that, in exchange, Greece will be granted debt relief and access to the European Central Bank’s quantitative easing (QE) program.

However, contrary to the government’s aims at the Eurogroup, debt relief talks were deferred to 2018, while Greece’s inclusion in the QE seems highly unlikely before that.

Although analysts believe that dissenters may not raise the ante during the summer – due to the tourist season and relief provided by the release of a bailout tranche – the government is expected to come under new pressure in the fall when Tsipras drafts the 2018 budget, which must stipulate a primary surplus of 3.5 percent.

Given the huge difficulties to achieve this target, Athens will find it hard to convince representatives of the country’s creditors that it will able to achieve this target without the need for yet more measures.

The Greek PM will also struggle in the fall to clear the hurdles leading to the completion of the country’s third bailout review, which will also involve the International Monetary Fund (IMF). The review’s focus will be on streamlining the Greek public sector, from which SYRIZA has drawn a large chunk of votes in the past and would not like to rock the boat. Another sticking point could be Tsipras’s promise to bring back growth, when forecasts for 2017 see an anemic rate of 1.5 to 1.8 percent.

According to reports, the left-led coalition is banking on elections taking place in June 2018 at the earliest so that it avoids having to implement pension cuts in 2019, as it had agreed with creditors and passed into law.

On the other had, some reports suggest that Tsipras may seek to spring an election surprise this fall or by the end of the year. This, however, will hinge on whether Greece will be given specifics by creditors about what sort of debt relief it can expect after the German elections in September, and on the degree of difficulty it will have to draft the 2018 budget.